The European Central Bank is increasingly desperate in its fight against inflation. Will further interest rate hikes strangle the economy for good? Some are now looking to unconventional measures to turn things around.
Experts refer to such a situation as stagflation: The economy has stalled, but prices are still rising quickly, and there is no way out in sight. It's a horror scenario for central bankers.
Lagarde managed to pacify the ECB's highest decision-making body, and external shocks like the pandemic and the war in Ukraine seemed to bring the brittle guardians of the monetary union more closely together. Even chief economist Philip Lane, who long thought inflation was a myth, was allowed to keep his job.
The fact that such a scenario is realistic can be seen in the plans that consumer goods manufacturers have for the German market, previously a discount paradise. Buyers for supermarket chains say that large brand-name companies are intending to jack up their prices even though production costs have begun falling again. Global consumer goods suppliers in particular would like to finally push through higher margins – at the expense of consumers and at the price of higher inflation rates.
Whereas electricity is still expensive in Germany because of old contracts, the Spanish, who have short-term contracts, are benefiting from the fact that market prices for natural gas and electricity have now fallen significantly. Inflation in the fourth-largest economy in the eurozone is correspondingly lower.
On the other hand, the ECB is still far from reaching its goal."The ECB's inflation target is unlikely to be reached until 2026 at the earliest," believe analysts at the Leibniz Center for European Economic Research in Mannheim, for example.
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